It has been a while since I last profiled a Portfolio Management Service; let us take a look at the equity PMS-es offered by Kotak Securities Limited. Unfortunately, they have chosen NOT to publicly disclose details such as the minimum amount to be invested, management fees or the profit sharing structure. I imagine that, like most things in life, these are negotiable.

• Origin
  • Market cap < Rs 2500 crores, Stocks of “growth oriented companies with sustainable business models backed by strong management capabilities”.

• Select Portfolio
  • Multi cap portfolio, stocks in sectors that are expected to be beneficiaries of demographic patterns & reforms; and infrastructure spending.

• SelectOptima
  • Market cap > Rs 4000 crores, Stock selection using criteria such as GARP, high ROI, etc.

• Klassic Portfolio - Flexi
  • Multi cap portfolio, based on the observation that “present market conditions hints at growth as a central premise to support valuations” - whatever that means.

• InvestGuard Plan
  • ‘CPPI Model’ - Invests across shares and fixed income products, moving from shares into fixed interest investments when the fund’s value drops below a predetermined “floor”. When markets start to move up, the product increases its holdings in shares, tapping into these growth opportunities.

• CORe Portfolio
  • Multi cap portfolio, stocks of companies in the business areas driven by consumerism, outsourcing, real estate plays as well as core infrastructure plays.

By the way, the website does not share any performance metrics either, except for this “risk-return profile” chart. This has been true of most of the PMS-es I looked at. Why not? Is it classified, top secret?

PS: They also offer a Mutual Fund PMS (KotakFreedom) with minimum investment of 5 lakhs, that gets you a relationship manager and their mutual fund research. Again, no data on fees, past performance, etc.

Mint reports on the growing number of Money Managers providing wealth management services; here are some statistics:

• There are ~ 83000 Indian millionaires, according to a 2006 report on Asia Pacific wealth by Merrill Lynch-Cap Gemini.
• Client Associates, a boutique wealth management firms, has 250 clients in Mumbai, Delhi and Bangalore.
• Verdant advises senior corporate executives, professionals and mid-sized entrepreneurs with an ability to invest at least Rs 1 crore.
• Elite has about 178 clients, including NRIs, in several states.

A nice summary of the PMS/WMS landscape in India.

Via Livemint:

• ICICI Prudential Asset Management, Kotak Securities and ASK Financial Services manage about Rs 2,500 crore each in PMS funds.
• Motilal Oswal manages about Rs 500 crore.
• Equity Intelligence has more than Rs 100 crore under management.

The use of the word ‘discretionary’ below makes me cringe - if you are aware of discretionary vs. system trading, you will know what I mean.

After Sebi introduced PMS regulations in 1993, . . . they were ‘non-discretionary’ PMS providers. In other words, they did not have the freedom to invest where they wanted and all investments were done in accordance with the wishes of the investors. This type of PMS is mostly extinct now.

It is ‘discretionary’ PMS that rules now and the fund managers use their discretion to invest in stocks once money is handed over to them.

If you don’t yet qualify as a “high networth individual (HNI)” but aren’t that patient either, here’s something that might be of interest, via ET:

Trashing the belief that customised investment products are only for HNIs, broking houses have come up with the idea of ‘pool PMSs’ for retail investors aspiring to become HNIs someday.

Customers do not even need a demat account to invest in pool PMSs; they only have to sign a general PMS agreement, entrusting the brokerage to manage their investments under a pool account.

Though intended for small investors, clients investing in pool PMSs need to invest a minimum of Rs 5 lakh, as specified by capital market regulator, SEBI.

. . . investors in pool PMSs, generally, are young professionals with an average annual income of Rs 10-15 lakh.

Sense an opportunity?

An article in Business Standard - Portfolio managers` kitty shrinks 25% as stocks wilt - offers interesting data:

• Securities and Exchange Board of India-registered PMS providers have a market of around Rs 10,000-15,000 crore, . . .
• . . . while the share of unregistered PMS operators could be at least 5 times more than that of the official players.
• Some small-sized brokerages and investment advisors are, in fact, offering PMS at a lower price of around Rs 25,000.

PMS-controlled asset base of Rs 60,000 - Rs 100,000 crores is no chump change!

Yet another PMS brought to my attention by a reader is the one offered by Parag Parikh Financial Advisory Services (PPFAS). In terms of quality of information, investment strategy and such, this is by far the best PMS I’ve come across so far. The key driver is probably their Chairman - his profile, weekly comments, and ET contributions demonstrate a keen understanding of the Indian markets, trading principles and investor psychology.

Their main PMS offering is called Cognito:

* Minimum Investment: Rs. 5 lakhs [the least amount mandated by the SEBI.] for residents, Rs. 10 lakhs for NRIs.

* Investment Strategy: Discretionary, “value” investing, long-term holdings, 15-22 stocks per portfolio.

* Management Fees:

Option A :1% p.a. on NAV, plus 10% share of the returns

Option B : 2% p.a. on NAV

* Performance: 2006 data isn’t included, but something is better than nothing!

There’s another scheme, Progeny, which is a PMS focused on investing in mutual funds. There are no fees since “Mutual Funds pay sales commission to financial intermediaries who gather subscription to their funds. This is the fee that Progeny earns.”

Even if you don’t subscribe to their services, the website (especially the “reports” section) is worth a regular visit.

Here’s a (somewhat delayed) response to a reader request for more info on Prudential ICICI’s PMS offering. PruICICI has ten (!) PMS options for you to choose from:

i) Aggressive Portfolio: Value-orientation, but could invest in high beta / mid-cap / illiquid / momentum stocks.

ii) Dividend Yield Portfolio : Combination of dividend income and capital appreciation.

iii) Deep Value Portfolio: Undervalued stocks.

iv) Focused Portfolio: Concentrated positions in stocks and sectors.

v) Preservation of Investment Amount (Asset Shield): Mix of fixed income and equity derivatives

vi) Cash future arbitrage: Sell futures, buy underlying stock.

vii) Only Options Portfolio: Stock & index options, long positions in call and put options as well as spreads.

viii) Non-Discretionary Portfolio: PMS Manager has full control.

ix) Alpha Portfolio: Hedging via futures. 

x) Infrastructure Portfolio: Invest in infrastructure stocks, e.g. capital goods, power, cement, metals, banking, etc.

Beyond this, their website does NOT provide any other (critical) details - minimum Investment, fees, past performance, etc.

A Google search turned up this July 2001 interview with Shailendra Bhandari, along with these numbers:

* Minimum investment: Rs 5 million (50 lakhs vs. the SEBI mimnimum of 5 lakhs?)

* Fees: 3-4%

* Assets under management: Rs 250 million (20 customers)

Again, how is a prospective customer supposed to compare PMS’ w/o access to performance metrics?

A reader pointed me to the PMS services offered by Kochi-based Equity Intelligence; here’s some details:

* Minimum Investment: Rs. 5 lakhs [This is the least amount mandated by the SEBI.]

* Strategy: Value investing in stocks,

* Management Fees:

Option A :3% p.a. (charged @ 0.75% quarterly on NAV) plus 10% share of the returns above 10% p.a.

Option B : 1% p.a. (Charged @ 0.25% quarterly on NAV) plus 20% share of the returns above 10% p.a.

* Performance - 165% annualized, over the Mar ‘03 - Sep ‘05 period, computed as a weighted average return of 504 investors.

Also check out the company’s introductory tutorial on Indian markets and online brochure. Note that with 504 investors, the assets under management would amount to over 25 crores - probably much more, given that most PMS customers would invest amounts greater than 5 lakhs each.

As suggested by Prasanth, I looked at the Motilal Oswal’s PMS offering for Indian investors. They have 2 schemes: Value PMS for long-term investors, and Bull’s Eye PMS for investors with higher risk appetite & shorter time horizons.

Bull’s Eye PMS:

* Minimum Investment: Rs. 50 Lakhs [But, investors can join at Rs. 25 Lakhs & then scale up based]

* Strategy - Large/mid cap stocks, 1-6 months holding period, minimum 15-20% move, use TA to time entry/exit - “minimize risk by timing stock selection”

* Fees - No information.

* Performance - No information.

Value PMS:

* Minimum Investment: Rs. 50 Lakhs

* Strategy - Value investing (a la Warren Buffett), 12-15 stocks per portfolio

* Fees - 1% annual fee (management+custody), 10% of profits

* Performance - No information, except for this statement - “delivered a return of 30% p.a. compounded over the last five years on a substantial size”.

Again, a lack of detailed performance metrics for both PMS schemes - why? Wouldn’t it be a good marketing tool? Isn’t it required by the SEBI? Won’t it let a potential investor compare different PMS offerings?

I’m kicking off a new category of posts aimed at Portfolio Management Services (PMS), accessible to retail investors. Per the SEBI, there’s over 130 “registered” PMS providers in India - here’s a complete list.

The data I’d like to compile for each:

* Investment requirements (minimum amounts, holding periods, etc.)

* Investment strategy (sectors, F&O, long/short, etc.)

* Performance (past months/years, comparisons to index, risk/reward ratios, etc.)

* Fee structures (profit-sharing, annual/maintenance costs, etc.)

As an example, let’s look at Geojit’s PMS:

* Minimum Investment - Rs.10 lakhs for resident Indians and Rs.25 lakhs for Non-Resident Indians.

* Strategy - Identify undervalued stocks and those with growth opportunities from a select list of well researched stocks

* Fees

** PMS fee:
Option 1: 3% p.a. (charged @0.75% at the end of every quarter on the average of beginning and ending NAV)
Option 2: 1% p.a. (charged @0.25% at the end of every quarter on the average of beginning and ending NAV) and performance fee

** Performance fee:
20% on gain in NAV over and above 12% p.a.

Surprisingly, I couldn’t find any performance-related data. Does anybody know whether SEBI requires PMS’ to disclose these statistics (I couldn’t find anything in the FAQ)?